Barclays Climbs as Staley’s Traders Thrive on Volatility

(Bloomberg) -- Barclays Plc Chief Executive Officer Jes Staley’s drive to make investment banking the centerpiece of his strategy paid off in the third quarter, with equities trading in a volatile market beating the bank’s Wall Street peers.

The shares approached a two-month high. The London-based bank’s equity trading income jumped 40% and foreign-exchange, rates and credit trading rose 23%, helping the company beat earnings estimates. Barclays also posted lower-than-expected impairments from the pandemic that’s roiling its key markets.

Staley said he plans to stay as CEO for “a couple of years,” quelling speculation about his future amid longtime criticism from an activist investor who has campaigned for his ouster and dubbed investment banking a poor use of capital.

“We have a strategy to deliver,” Staley said Friday in a call with reporters. “I am not ready to push off the dock just yet. It would be nice to be here in kinder winds” than a pandemic and Brexit preparations, he said.

Total trading income surged 29%, surpassing the 21% average among its Wall Street peers. While Staley has long lauded how Barclays’s investment bank has gained market share as European competitors struggled, the division remains small compared with those U.S. rivals.

The business generated 1.7 billion pounds ($2.2 billion) from trading stocks and bonds in the third quarter, compared with the average $4.7 billion reported by the five Wall Street giants including JPMorgan Chase & Co. and Citigroup Inc.

Staley signaled that his securities unit has further to grow. “We don’t think we have a cost challenge” at the corporate and investment bank. “In fact, we want to continue to invest in that business.”

The U.K. division may be in line for steeper cuts. “The group will be evaluating actions to reduce structural costs, which could result in additional charges, the timing and size of which remain to be determined,” the bank said in its earnings statement.

“We learned a lot through the pandemic,” Finance Director Tushar Morzaria said, citing a move to house call-center operations in the bank’s branches.

Since the start of the former JPMorgan veteran’s tenure as CEO in December 2015, Staley has rejected repeated criticism from Edward Bramson, one of his largest shareholders, who considers businesses like credit cards more profitable. Bramson has also slammed Staley after U.K. regulators began investigating Staley’s account of his ties to Jeffrey Epstein, the deceased financier and sex offender.

While bringing in former JPMorgan colleagues and ousting others, the American-born CEO has moved to increase direct control of the business.

The bank repeated that it would provide a year-end update on its plans for resuming dividends after the Bank of England forced banks to suspend them early in the crisis. Forced dividend suspensions have whipsawed lenders around the world, with Barclays still down about 40% this year.

“This is the strongest the bank’s balance sheet has been,” Staley said of the context for his talks with regulators.

The shares rose 7.6% as of noon in London.

While he said he plans to stick around, Staley praised C.S. Venkatakrishnan and Paul Compton, who were recently promoted to jointly run the corporate and investment bank and became the focus of succession speculation.

Compton and Venkatakrishnan are “two very accomplished professionals,” Staley said. “Having people who are in a position to succeed as CEO is healthy.”

Other key points

• The bank’s domestic British business and credit-card divisions both swung to a profit
• “The economic forecast is more moderate than we would have thought a couple of months ago,” and Britain’s mortgage market is “surprisingly robust,” Staley said
• The lender took a 608-million-pound charge to anticipate bad loans from the crisis -- less than the 1 billion pounds analysts estimated. It’s likely that impairments will fall in 2021, Barclays said.

©2020 Bloomberg L.P.